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Islamic Financial Products and Concepts

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Islamic Financial Products and Concepts

Products and Concepts

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Islamic Financial Products and Concepts: Products and Concepts by Nik Norzul Thani
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Islamic finance is a global phenomenon that is now embodied as an integral component of global finance. An essential reference tool for the Islamic finance industry, this book discusses the Islamic financial products currently available in the marketplace.

Table of Contents

Chapter 1 - Introduction This will introduce the readers to the concept and jurisprudential basis of Islamic Finance. The following chapters will discuss and analyze the different products available in the market Chapter 1 - Al-Bai' Bithaman Ajil (Credit Sale) The most popular Islamic banking transaction seems to be Al-Bai' Bithaman Ajil. This is an agreement whereby a bank buys an asset or property and sells the said asset or property to a customer at an agreed defined price which the customer has to pay on a deferred basis or by periodic instalments. Chapter 2 - Bai' Salam (Advance Purchase) Bai' Salam, also known as Bai' Salaf or Bai' Mafalis, is a sale in which advance payment is made to the seller for deferred supply of goods. Chapter 3 - Istisna' (Commissioned manufacture) Bai' Salam is the deferred sale of a commodity which is not possessed by the seller and which he grows or procures for supply to the buyer on the condition of prepayment, Istisna' is a contract of sale of goods which a skilled workman commits himself to manufacture for the buyer. Chapter 4 - Ijarah (Leasing) Ijarah simply means a lease contract as well as a hire contract. In other words, the contract of Ijarah is the sale of usufruct. Chapter 5 - Mudharabah/Muqaradhah (Profit-Sharing) One of the most widely quoted operating principles in Islamic Banking is the principle of Mudharabah, sometimes known as Qirad or Muqaradhah. Chapter 6 - Musharakah (Partnership) This concept is normally translated in English as 'partnership'. Literally, Musharakah means a joint-venture agreement between two parties to engage in a specific business activity with an aim of making profit. Chapter 7 - Musharakah Mutanaqisah (Musharakah Muntahiah Bi Al-Tamlik) This is a newly developed contract by which the investor's share in a Musharakah is progressively retired or liquidated. Chapter 8 - Murabahah (Set profit sale) It is also called 'cost-plus financing' or 'financing resale of goods' and refers basically to the sale of goods at a price covering the purchase price plus a profit margin agreed upon by both parties concerned. Chapter 9 - Rahn (Pledge/security) Literally, it means to pledge, pawn or retain. Technically, it means a contract of pledging a security and becomes binding when possession of the pledge takes place.Chapter 10 - Dhaman/kafalah (Guarantee) Literally, "Dhaman" means combination i.e. the combination of responsibility and liability. Technically, the majority of Islamic Scholars define it as the combination of a responsibility with another existing responsibility. Chapter 11 - Hawalah (Assignment) Literally, Hiwalah means "to transfer" or "to shift". Technically, it means a contract that allows the debtor to transfer his debt obligation to a third party ("payer"). Chapter 12 - Qardh al-Hasan "Qard" means the loan of fungibles, and is repaid with goods of identical description, rather than with the very goods originally borrowed. Chapter 13 - Bai' Al-'Inah Bai' Al-Inah is a transaction which involves the sale and buy back of an asset by the seller. Chapter 14 - Bai' Al-Dayn Dayn in arabic term denotes the meaning of a debt. Technically, Bai'Al-Dayn means a sale and purchase transaction of a quality debt i.e. the default risk of the debtor is low, and the debt must be created from the business transaction that conforms with Shari'ah. Al-Dayn can be either monetary, or a commodity such as food or metal. Chapter 15 - Bai' Muzayadah An action by a person to sell his asset in the open market, which is followed with the process of bidding among potential buyers who would quote for a higher price. Chapter 16 - Hibah A gift awarded to a person on voluntary basis. Chapter 17 - Ibra' An act by a person to withdraw his rights i.e. his rights to collect payment from a person who has the obligation to repay the amount borrowed from him. Chapter 18 - Sukuk A document or certificate which represents the value of an asset. Chapter 19 - Ujrah/Ajr A financial charge for the utilisation of services or manfaah. Chapter 20 - Other products This chapter will discuss other products as well as new products that can be considered for the future. Chapter 21 - Conclusion
Release date Australia
February 17th, 2009
Country of Publication
United Kingdom
John Wiley & Sons Ltd
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